Find out exactly how many units you need to sell to cover all your costs — instantly. Enter your fixed costs, variable cost per unit, and selling price to get break-even units, revenue, contribution margin, and margin of safety.
Rent, salaries, insurance, software subscriptions — costs that don't change with output.
Raw materials, packaging, shipping, direct labor — costs that scale with each unit sold.
Your projected or actual sales volume to calculate margin of safety.
| Business | Fixed Costs/mo | Variable Cost/unit | Price/unit | Break-Even Units/mo | Break-Even Revenue |
|---|---|---|---|---|---|
| Restaurant (avg meal) | $8,000 | $12 | $35 | 348 meals | $12,174 |
| E-commerce (apparel) | $3,500 | $18 | $55 | 95 orders | $5,216 |
| Freelance designer | $1,200 | $0 | $120/hr | 10 hours | $1,200 |
| SaaS (monthly plan) | $15,000 | $8 | $49 | 366 subscribers | $17,921 |
| Food truck | $2,800 | $4 | $14 | 280 items | $3,920 |
| Online course | $500 | $0 | $197 | 3 students | $591 |
Numbers are illustrative averages. Real results vary by location, product mix, and market conditions. Use this calculator with your actual figures for accurate planning.
Break-even analysis is one of the most fundamental tools in business finance. It answers a deceptively simple question: how much do I need to sell before I stop losing money?
Every business has two types of costs: fixed costs that you pay regardless of how much you produce (rent, insurance, salaries), and variable costs that increase with each unit you make or sell (materials, packaging, shipping). When your total revenue equals the sum of both cost types, you are at the break-even point. Sell less, and you run at a loss. Sell more, and you generate profit.
Break-even analysis is not just a startup exercise. Established businesses use it to evaluate new product lines, set pricing strategies, decide whether to open new locations, and measure the risk of their current cost structure. It is a quick, powerful lens for any financial decision that involves fixed and variable costs.
The core formula has three variables:
The formula in units is:
BEP (units) = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit)
The denominator — Price minus Variable Cost — is the Contribution Margin (CM). It represents how much each sale contributes toward paying down your fixed costs. Once your cumulative contributions equal your fixed costs, you have broken even.
In dollar terms:
BEP (revenue) = Fixed Costs ÷ CM Ratio
Where CM Ratio = (Price − Variable Cost) ÷ Price × 100
A higher CM ratio means you need less revenue to reach break-even. This is why high-margin businesses (software, consulting, digital products) typically have much lower break-even points than low-margin businesses (grocery, fuel distribution).
Follow these five steps to get your break-even point in seconds:
Tip: Run the calculator three times — once with your best-case scenario, once with your expected scenario, and once with your worst-case scenario. The spread between these scenarios defines your risk exposure.
A casual dining restaurant has monthly fixed costs of $8,000 (rent $3,500 + staff $3,200 + utilities $600 + insurance $700). Each meal has an average variable cost of $12 (food, disposables, kitchen supplies). The average check per customer is $35.
Contribution Margin: $35 − $12 = $23 per meal
Break-Even: $8,000 ÷ $23 = 348 meals per month
Break-Even Revenue: 348 × $35 = $12,174/month
If the restaurant serves 500 meals/month, the margin of safety is 500 − 348 = 152 meals (30.4%). At that volume, monthly profit is (500 − 348) × $23 = $3,496.
An online apparel store has monthly fixed costs of $3,500 (platform fees $200 + warehouse $800 + salaries $2,000 + marketing retainer $500). Each item sold costs $18 in variable costs (product cost, packaging, fulfillment). Average order value is $55.
Contribution Margin: $55 − $18 = $37 per order
CM Ratio: $37 ÷ $55 = 67.3%
Break-Even: $3,500 ÷ $37 = 95 orders/month
Break-Even Revenue: $3,500 ÷ 67.3% = $5,200/month
This store would be profitable immediately at modest scale — 95 orders per month is achievable for most small e-commerce businesses within the first year.
A SaaS startup charges $49/month per subscriber. Fixed costs run $15,000/month (founding team salaries, cloud infrastructure, tools). Variable costs are $8 per subscriber (payment processing, cloud overage, support tier costs).
Contribution Margin: $49 − $8 = $41 per subscriber
CM Ratio: $41 ÷ $49 = 83.7%
Break-Even: $15,000 ÷ $41 = 366 subscribers
Break-Even Revenue: $15,000 ÷ 83.7% = $17,921 MRR
At 500 subscribers, the margin of safety is 500 − 366 = 134 subscribers (26.8%). Monthly profit = (500 − 366) × $41 = $5,494. SaaS businesses benefit from very high CM ratios because most variable costs are small relative to the subscription price.
Break-even analysis is most valuable in these situations:
A lower break-even point means profitability comes sooner and with less risk. Here are proven strategies:
Break-even analysis works best alongside other financial metrics:
| Metric | What It Measures | Relationship to Break-Even |
|---|---|---|
| Break-Even Point | Minimum sales to avoid a loss | — |
| Gross Margin % | Revenue minus COGS as % of revenue | Similar to CM Ratio but uses COGS, not variable costs per unit |
| Operating Leverage | Sensitivity of profit to sales changes | High fixed costs = high operating leverage = risk amplified around break-even |
| Payback Period | Time to recover an investment | Break-even gives monthly profit; payback divides investment by monthly profit |
| Cash Flow Break-Even | Point where cash inflows = cash outflows | Different from accounting break-even if there are non-cash charges (depreciation) |
| ROI | Return on a specific investment | ROI requires a target profit above break-even; break-even is the floor |
The most important limitation of break-even analysis is that it models a single product. Multi-product businesses must use a weighted average contribution margin — the CM of each product weighted by its share of total sales. If your product mix shifts toward lower-margin items, your break-even point rises even if costs stay constant.
The break-even point is the level of sales at which total revenue exactly equals total costs — you make neither a profit nor a loss. It is the minimum number of units you must sell (or the minimum revenue you must generate) to cover all your costs. Any sales above the break-even point generate profit.
Break-Even Units = Fixed Costs ÷ (Selling Price per Unit − Variable Cost per Unit). The denominator (Price − Variable Cost) is called the Contribution Margin per unit — the amount each sale contributes toward covering fixed costs. In revenue terms: Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio.
Fixed costs remain constant regardless of how much you produce or sell — rent, salaries, insurance, software licenses, and loan repayments are typical examples. Variable costs change in direct proportion to output — raw materials, packaging, shipping fees, and sales commissions are variable costs. Correctly classifying costs is the most important step in any break-even analysis.
Contribution margin (CM) is the selling price minus the variable cost per unit. It represents how much each unit sold 'contributes' to covering fixed costs and generating profit. The Contribution Margin Ratio (CM Ratio) expresses this as a percentage of the selling price: CM Ratio = CM ÷ Price × 100. A higher CM ratio means you reach break-even faster.
Margin of safety measures how much your actual (or projected) sales exceed the break-even point. It indicates how much sales can drop before you start making a loss. Margin of Safety (units) = Actual Units − Break-Even Units. Margin of Safety % = (Actual Units − Break-Even Units) ÷ Actual Units × 100. A margin of safety above 20% is generally considered healthy.
You can lower your break-even point by: (1) Reducing fixed costs — negotiate rent, cut subscriptions, automate tasks to reduce headcount; (2) Reducing variable costs — bulk purchasing, better supplier negotiations, streamlining production; (3) Increasing your selling price — add premium features, bundles, or move upmarket; (4) Improving your product mix — focus on higher-margin products. Even a 10% reduction in fixed costs or a 5% price increase can dramatically lower your break-even units.
Yes — break-even analysis is one of the first calculations any startup should do. It tells you exactly how much revenue you need before you can start paying yourself and whether your business model is viable. It also helps with pricing decisions, fundraising conversations, and setting realistic sales targets. Most investors will ask for your break-even analysis before committing capital.
Break-even analysis assumes a single product (or fixed mix), constant prices, and linear cost behavior — assumptions that rarely hold perfectly in real businesses. It also ignores the time value of money and cash flow timing. Use it as a planning baseline, not an absolute forecast. Sensitivity analysis (varying price and cost assumptions) makes the tool much more powerful.
Break-even analysis focuses on accounting profit — the point where revenue covers all costs. Cash flow analysis tracks actual cash inflows and outflows. A business can be above its break-even point on paper but still face a cash crisis if customers pay late (accounts receivable) or inventory ties up cash. Both analyses are necessary for complete financial planning.